Switzerland’s residential market has seen steady growth during the last seven years. Safe-haven fundamentals and prudent economic management underpinned demand in a supply constrained residential market. But last year has seen the market slow. In January of 2015 the Swiss franc was decoupled from the euro, appreciating against other leading currencies.
This has made Swiss property more expensive for foreign purchasers (see The Impact of Currency below).
The costly franc has led to a fall in exports, contributing to a cooling of the Swiss economy. Low population growth is forecast. The country’s strict citizenship system coupled with the recent Lex Weber initiative (see Switzerland – Policy and planning trends) will serve to restrict foreign investment. Together, we anticipate price falls at a national level in the medium term.
Austria witnessed a period of exceptionally strong residential price growth at a time when many other Eurozone markets were falling. At the national level, prices have increased by 41% since 2008, compared to falls of 0.9% in France over the same period. Residential markets were driven by record low interest rates, and supported by low levels of unemployment in a resilient domestic economy.
The market has since slowed, with prices appreciating by just 1.2% in the year to Q1 2015. Vienna, which had led price growth, has since slowed too. The city’s prime markets are driven in part by foreign buyers, particularly those from Eastern Europe and the CIS. Economic sanctions in Russia and ongoing troubles in Ukraine have contributed to a decline in transactions at the top end of the market.
The market is a rental one (41.5% of the households rent their home), and rents continue to rise – average rents plus running costs are up 29% since 2008.
The French residential market ‘double-dipped’, recovering to a 2011 peak within two years, but has followed a downward trend since. While prices remain suppressed, transaction levels across France have rallied 35% from a 2009 low, spurred by record low mortgage rates.
Challenges lie ahead in consolidating public finances, improving competitiveness and reducing unemployment. Weak economic growth is forecast, which will bear down on the country’s real estate markets, although a change of rhetoric in President Hollande’s policies toward the wealthy has helped the prime sector.